bxr中国路边的零售业英文版10.docx

bxr中国路边的零售业英文版10.docx

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bxr中国路边的零售业英文版10

RoadsideretailinChina

GasolinereachesthehugeChinesemarketthroughafragmentedretailanddistributionnetworkofabout90,000stations,almostallstateowned.Manyarerunmoreassinecuresthanasbusinesses,oftenwithastafffourtofivetimeslargerthantheinternationalnormbutwithlessthanaquarteroftheaveragegasolinethroughputofUSstations.TheChinesegovernment,whichiswellawareoftheproblem,hasresolvednottoallowthecountryenergyinfrastructuretoburdenthewholeeconomy:

itisfastderegulatingthesector,whichwillbefullyopeneduptoforeigncompaniesin2004underthecommitmentsattendingthecountrymembershipintheWorldTradeOrganization（WTO）.Foreignoilcompanieshavehithertobeenrestrictedtoone-offlocaldealsinspecialeconomiczonesortiedtoinvestmentsintoll-roadconstruction.

Althoughthestageshouldthusbesetforcannycorporationstomoveintothemarket,itremainsunclearhowtheywillmakemoney.Competitionisalreadydrivingdownretailmarginsongasoline,whilepricesforthebeststationsiteshavesoaredasChina抯largedomesticoilcompanieshaverushedtobuythem.OilcompaniesintheWestfacingsimilarmarginpressuresknowthatmostgasolinestationsareviableonlyiftheyoffergeneral-retailfacilitiesatleastaslargeasaconveniencestore,inadditiontogasoline.ThisistrueinChinaaswell.Thehighest-volumesitesmightbemadeprofitableontheirfuelrevenuesalone,buttherestneedsubstantialnonfuelrevenuestomakeaprofit.

Thestrategicimplicationsareclear.InChinaaselsewhere,thefirstdecisionforanoilcompanyiswhethertoownandoperatesitesormerelytosupplythemwithgasoline.Ifthecompanyoptsforownership,ithasachoice:

toadoptaretailstrategyandpursuenonfuelrevenuesfromaportfolioofretailsitesortotargetonlythehighest-volumesites,usingthemtobuildahigh-qualitygasolinebrandthatcanalsobeofferedthroughindependentretailers.Atpresent,theChineseoilmajorsarepursuingneitherstrategy;theyhavesimplyrushedtograbanyavailablesite,wheretheysellasmuchpetroleum-basedproductaspossiblewhileignoringtheretailpotential.Themultinationalshavebeenmorejudiciousinselectingsitesfortheirinitialjointventures,buttheytoohaveneglectedthestrategicchoice.Unlessallofthesecompanies,domesticandinternationalalike,changetack,theirinvestmentsinexpensiveChineserealestatemayunravel.

Themarketandsiteeconomics

China抯dominantoilcompaniesareSinopec,inthesouthandeast,andPetroChina,whichhasthemorecomprehensiverefineryanddistributionnetworkofthetwo,inthenorthandwest（Exhibit1）.Thetwocompaniesaimtocapture,betweenthem,70percentofChina抯gasolinesalesvolumeby2005.SincetheirIPOs,in2000,theyhaveinvestedheavilyinpetroleum-relatedinfrastructureandinbrandbuilding.Havingalreadyraisedtheirshareofsalestomorethan40percentandsecuredmostoftheprimesitesinthebiggestcities,theyareontracktomeetthistarget.

Until2004,multinationalcompanieswillbeallowedtoownoutrightonlythe300orsositestheynowpossessthroughlocaldealsstruckbeforegovernmentderegulationofforeigninvestmentinthesector,inthemid-1990s,buttheycanbuilduptheirholdingsthroughjointventureswithChinesecompanies.BP,ExxonMobil,andRoyalDutch/ShellareestablishingjointventureswithPetroChinaandSinopecbycontributingcapitalforthepurchaseofsitesandbysupplyinghigher-marginpremiumfuels;BPandPetroChina,forexample,aimtoboosttheirholdingsto950stationsbyacquiring670stationsfromlocalcompaniesinFujianandGuangdong.Suchjointventuresbindthepartnersonlyinspecificprovincesandhavesofarbeenformedinjust4outof27ofthem.Fortheremainder,theoptionsofbothpartiesarestillopen.

The60percentofsalesnotcontrolledbythetwoChineseleadersiscurrentlyheldbyvariousquasi-governmentalentities,includinglocalandprovincialauthoritiesandstate-ownedenterprises.Citygovernments,forexample,havestartedtheirownretailinggroups,oftenbuiltaroundlocalhighway-constructionprojects.Someprivateoperatorsarealsoemerging:

forexample,ChinaResourcesEnterprise,aholdingcompanybasedinHongKong,has23stationsandisthinkingaboutopeningmore.Butingeneral,smallercompanies,dauntedbythebiddingpowerofPetroChinaandSinopec,areholdingback.

BothofthemajorshopethattheirspendingwillcreateaprofitablestructureforChina抯gasoline-retailingindustryafterthemarketopensupin2004.Internationalexperienceshowsthatgasolineretailingtendstoberelativelyprofitablewhereverthetopthreeparticipantscontrol80percentofthemarket,growthisstrong,andthesupplyofgasolineisshort.Chinashouldmeettheseconditions.PetroChinaandSinopecareconsolidatingthemarketbybuyingouttheirindependentrivalsand,giventheirheadstartoverthemultinationals,shouldsucceedingainingaleadingpositioninthemarket.Growthindemandisforecasttoremainhigh,especiallyforhigh-qualitygasoline.Andalthoughsupplyiscurrentlyinbalancewithdemandatthenationallevel,itrunsshortinthecoastalregions,wherebothdemandandgrowtharegreatest.

Retailmarginsaretighteningfast,however.AsinalmosteveryderegulatedChineseindustry,domesticpricecompetitionwillprobablybesevereasthemarketopensup.PetroChinaandSinopecfoughtseveraldamagingpricewarsfrom1997untiltheywererestrainedin1999bystate-imposedpricecontrolsthatarenowbeingremovedintandemwithChina抯entryintotheWTO.Theresumedpricecompetitionwillintensifywhennewforeignanddomesticcompaniesarepermittedtopurchasesitesin2004.Moreover,allcompaniesinthemarketwillgaingreateraccesstogasolineasimporttariffsforrefinedproductsfallto5percent,from9.Wherecomparablereformshavetakenplace梚nAustralia,France,Israel,Japan,andNewZealand梤etailmarginshavedroppedbyuptohalf.

Inanticipationofthisfiercelycompetitivefutureenvironment,PetroChina,Sinopec,andnewentrantswillingtotakethemonareratchetingupspendingonlocations,brands,andmarketing.Goodlocations梩he20percentofurbangasolinestationsthatgenerate60percentoftherevenues梐rescarce,andzoningregulationsandthehighcostoflandlimitnewentrants.Theseprimesites,whichmovemorethan1,500tonsinvolumeandgenerateover900,000renminbi（$108,700）infuel-relatedgrossmarginsayear,currentlysellforupto20,000,000renminbi,threetosixtimesthepriceofastationwithequivalentturnoverintheUnitedStatesorEurope.Theinflatedcostsatthehighendofthemarketarealsodraggingupthepriceofsmallerstations,to5,000,000to10,000,000renminbi.Thecostofpromotionalcampaigns,includingtelevisionadvertising,isaboutassteepasitisindevelopedmarkets.

Makingsitespay

Sellinggasolineanddieselfuelthroughretailoutletsisacostly（andthereforerisky）business.UnlessPetroChina,Sinopec,andtheforeignjointventurepartnersofbothcompaniesreconsidertheirindiscriminatebuyingofsites,theycouldfindthattheirstationportfoliosholdmorebalancesheetliabilitiesthanassets.

Itisvitaltomakethesitespay,buthow?

Thereislittlescopetocutoperatingcosts,whicharealreadylowbyglobalstandards;labor,forexample,isrelativelycheapifinefficient.Capitalcostsarelargelyfixedonceastationhasbeenbought.Wholesalemargins,onwhichtheChinesemajorshaveusuallyreliedtosubsidizetheirretailoutlets,willprobablydwindletothecostoftransportandstorageasWTOcommitmentsandotherreformstakeeffect.Thetruthisthattheeconomicsofmostsiteswon抰workunlesstherearesignificantnonfuelsales,fortheyimprovesitemarginsbyliftingrevenueswithoutraisingcostsinacomparableway（Exhibit2）.Petroleumcompaniesthushavethreepossibilities:

theycanfocusontheretailopportunityoftheirsites,concentrateonahigh-qualityfuelservicethroughthehighest-volumesites,orignoreretailaltogetherandbewholesalersofcommodityfuels.

Theretailstrategy

Elsewhereintheworld,multinationaloilcompanieshavecompensatedfortightmarginsongasolinebyinvestinginadditionalrevenuestreams.Thiskindofstrategicbehaviortakesplaceinthecontextofaglobalretailsectormovingfromownershipofproductcategoriestoownershipofretail"occasions"梩heway-to-workorweekendstopforgasolineandincidentals,routineSaturdayshopping,thelessfrequenthouseholdstock-up.Gasolinestationsaredesignedtoattractcustomerswhowantmorethanjustfuelfortheircars,andinEuropeandtheUnitedStatestheseformatsnowgenerateasmuchrevenuefromextrasasfromgasoline.

Indevelopedeconomies,thismodelhasbeenadoptedslowlybecauseittakestimetoconvertordismantlethelegacyassetsofalong-establishedgasoline-onlystrategy.Chineseplayershaveanopportunitytogostraightfromthebasicgasolinemodeltointegratedretailing.Yetsofar,PetroChina,Sinopec,andeventhemultinationalshavebeenreluctanttopursuenonfuelretailstrategiesontheircurrentsites,fortheyhavebeenpersuadedthat,inChina,theubiquityoflocalmom-and-popstoresmeansthatconveniencestoresatgasolinestationsareredundantandthatmarginsonnonfuelitemsaretoothin.Themarketingeffortsofthesecompanieshavethusbeenconfinedtogasoline,andtheirsitesoffernomorethanalimitedselectionoflow-costadditionalgoodsandservicessuchascigarettes,snacks,andautolubricants.

Nonetheless,theintegratedretailmodelforgasolinestationscansucceedinCh